Government warned: stay away from negative gearing

THE real estate industry has urged the Abbott Government not to touch negative gearing in its second Budget in May.

As Treasurer Joe Hockey looks to plug a $40 billion hole but aims to avoid any major cuts to the budget, the Real Estate Institute of Australia has told Mr Hockey the tax break should remain.

In its pre-budget submission, the real estate agents' lobby argued any moves to change negative gearing or the capital gains tax discount could affect housing supply.

REIA chief executive Amanda Lynch said any changes would need the federal government to put more money into social housing to offset potentially higher rents.

The industry's submission also argued CGT should not be increased, conveyancing stamp duties should be abolished and young Australians should be able to access their superannuation to fund a deposit for a first home.

However, their submission was released on Thursday as a lengthy Senate inquiry into affordable housing draws to a close.

Numerous social services groups, leading economists and other witnesses have urged that inquiry to change negative gearing to improve housing supply, arguing the policy is reinforcing income inequality.

The Senate inquiry is expected to report its findings to parliament early next month as the government formulates its second budget.